Frequently asked questions
What is lifetime value (LTV)?
Lifetime value measures the average amount of money an individual spends with your brand over their entire customer lifespan. It is sometimes referred to as customer lifetime value (CLV). Recharge calculates LTV by dividing a merchant’s annual revenue per user by their churn.
What is cost of acquisition (CAC)?
Cost of acquisition, also referred to as customer acquisition cost, measures the average amount your company spends to acquire a new customer, including marketing and advertising costs. Within your business, CAC can vary across different customer segments.
What is average order value (AOV)?
Average order value is a key metric that signals the average amount of money a customer spends per order. To calculate AOV, divide your company’s revenue by your total number of orders.
What is churn?
Churn rate, also referred to as the rate of attrition, is the percentage of your customers who “churn out” (meaning they cancel their business with you) over a set period of time. For example, annual churn measures the percentage of your customers who churn out of your business over a year-long period, while monthly churn calculates the percentage of your customers who churn over a month-long period.
